The future of Qantas
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at 21:57 by 6Continents.
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transtraxmanParticipantBuying Business Travel (BT´s sister publication??) today 5th December published this article:
“Qantas to cut 1,000 jobs as bookings slump”http://buyingbusinesstravel.com/news/0521742-qantas-cut-1000-jobs-bookings-slump
This and other news media talk about Qantas´ difficulty in surviving in a difficult downward looking market and as a (at least) perceived government owned flag carrier.
This was in addition to the interesting article CAPA published today about Qantas which explains the whys and wherefores of its woes.
“Is Qantas and Australia’s aviation system in meltdown? No, but challenges are all around”The comparison is made with Virgin Australia which is very boyant and aggressive. Apparently the rules and regulations about ownership are different in each airline.
Qantas has a limit of 25% to be owned by any single foreign airline (that is what BA bought in the tranch of shares sold by the Australian government on partial privatisation of QF.). To that must be added the clause which permits various foreign airlines together having up to a grand total of 35% of the stock.
That clause is the reason Etihad, Singapore Airlines and Air New Zealand as well as Virgin group are all shareholders of V.Australia. However, since there is another clause which permits 100% foreign ownership of domestic airlines(management must be local), the intrigue does not stop there.
“Virgin’s international ownership and control integrity is protected by ring-fencing the international operation from the domestic operation.”(CAPA)
This means that the four aforementioned groups own 80% of the domestic operation.The importance of this is mentioned by CAPA again “A recent equity raising by Virgin, made easier thanks to these shareholdings, has provoked indignation from Qantas that it is being forced to fight on unequal terms with Virgin Australia.”
All this means that Qantas wants to bite the bullet, change its ownership structure to fight on equal terms against V. Australia and sort out its antiquated work pratices.
On the same lines Airwise/Reuters published this article today as well
“Qantas Pleads For Australian Govt. Intervention”http://news.airwise.com/story/view/1386246526.html
This explains the problems QF faces with the Australian government and Parliament as it wants to increase the 49% foreign ownership(not only airline) limit. It does, however, illustrate that the airline is attractive to investors not least because of its “underlying profit to AUD$192 million for the most recent financial year.”(Airwise) and
“…the world’s most valuable airline frequent flyer programme that serves to deliver considerable loyalty and enormous revenue streams.”(CAPA)That means a string of foreign airlines could be interested.
Emirates is the first and most obvious – in order to protect its partnership with QF. Could that then mean that Emirates would start on doing an Etihad – investing in other airlines to build world partnerships? My view is that Emirates would not invest (be allowed to invest??) alone. It would be with another or other partners but who?The other obvious conclusion is to look at QF´s alliance – oneworld. Here there are various possible suitors BA, Qatar, Malaysian and Cathay Pacific, at least.
-BA is too far away to invest on its own.
-BA and Qatar – this is a possiblity with QF transferring its flights from Dubai to Doha. It solves the problems of connections with European cities (as with Emirates but not so threatening for BA)and solves the lack of penetration of Qatar in the Australian market.
-BA and Malaysian: not as attractive as Qatar but connecting through Kuala Lumpur is a possibility.
-Cathay Pacific with BA is probably an impossible dream but
-Cathay Pacific alone is a strong possibility especially with regard to the Chinese market with Dragonair. It might mean QF dropping its amibitions of a LCC Jetstar subsidiary based at Hong Kong.In another thread on BT…
“British Airways Rumoured to be Axing Historic London-Sydney 747 Route”….there is a lot of speculation as to why BA is the only remaining European carrier to fly the long route.
I would say that there could be two reasons
1- to protect its own market share on this traditional route with a lot of business, family and sporting connections whatever happens and
2- to reinvest in Qantas with others to protect its own interests and its plans with oneworld – especially with Qatar.If the rules on foreign airline ownership were changed so as to be the same as Virgin Australia then I am sure that BA would jump at the chance. We shall see.
5 Dec 2013
at 20:44
SimonS1ParticipantSo Qantas is now officially junk status. Doesn’t look too clever.
6 Dec 2013
at 09:16
transtraxmanParticipantThe Austarlian government´s answer to Qantas
Airwise/Reuters 6th December, 2013
“Australian PM Spurns Qantas Plea For Help”7 Dec 2013
at 20:55
JohnHarperParticipantAlasdair, I agree. QF staff are demoralised and unsurprisingly showing it. QF are caught between a rock and a hard place. They, unlike Virgin are limited in who can invest but they can’t either have government assistance. One thing or the other needs to change. I’m sure EK are waiting to buy a substantial share.
I will be flying with them in February and am interested to see how it’s all going.
8 Dec 2013
at 14:15
JimmywrightParticipantHippocampus, max they could buy is 20%. This is the crux of the whole issue. Unlike Virgin Australia, Qantas is limited through the Qantas Sales Act (which was put in place to protect it when it was privatised) to 49% foreign ownership, of which a maximum of 35% can be owned by foreign airlines, and no one individual or business can own no more than 20%.
As you would know BA used to have a stake in Qantas but sold up because having 20% was pointless.
Virgin Australia on the other hand is now over 70% foreign owned, namely Singapore Airlines, Ethihad and Air New Zealand. They get around traffic rights issues on overseas flights by structuring the company such that international flights are operated by a separate company that is 100% Australian, which is owned by Virgin Australia, which is foreign owned, something Qantas is prevented from doing.
Qantas needs an injection of funds, that money isn’t coming from within Australia and o/s investors are blocked by the Qantas Sales Act, which IMO has well and truley served its intended purpose and should be repealed. The irony of course it won’t be repealed as many see the airline as being an Australian icon that should be Australian owned, but by being so protectionist they are aiding it’s potential demise or more likely considerable downsizing.
9 Dec 2013
at 20:24
CXDiamondParticipantThe posts in another thread about Qantas struggling as a result of their new routing to Europe through DXB are very interesting.
I did wonder at the time about the wisdom of routing both services through there and abandoning Singapore so much. No thought either seemed to go in to the timings of the flights and the availability of connections. To a point Qantas was constrained by their LHR slots but I’m sure given the timing of them it would have been easy to change them for something more suitable to DXB connections. Clearly nobody bothered to really consider the logistics of that change.
Given that Emirates have the market tied up through DXB you would wonder about the need to add two additional A380s on the SYD-DXB-LHR route, maybe the demand just isn’t there given all the other competition on the route from almost any other airline based between Australia and Europe. I understand that now that Air India are serving SYD again even they are competing on the Kangaroo Route after many years absence.
As others have said, unless Joyce can pull rabbits out of hats, his days ought to be numbered.
14 Dec 2013
at 09:47
AMcWhirterParticipantUnless you need to break your journey in India then Air India isn’t a serious option. The outward LHR-SYD requires an 11 hour transit in Delhi while on the way back, passengers must overnight which requires a visa.
PAL would be an option were it to fine tune its schedules but Qantas would have more to fear when Garuda enters the kangaroo route (from London) at the end of May. As per last year’s proposed schedule, Garuda is expected to offer same plane service right through to Sydney (via Jakarta) with connections at Jakarta for Perth.
14 Dec 2013
at 16:23
JimmywrightParticipantCXDiamond, Qantas is not struggling because of their partnership with Emirates. Beleive it or not, there is more to Qantas than the two routes to the UK. Besides these two routes were starting to bleed even before the change.
15 Dec 2013
at 23:54
transtraxmanParticipantPublished in Airwise/Reuters 15-12-13
“Australian PM Will ‘Try To Be Helpful’ On Qantas.”
The politicians start to lay the groundwork to change the Qantas Sale Act of 1992 eliminating the restrictions on foreign ownership.http://news.airwise.com/story/view/1387136191.html
Meanwhile in the Virgin camp….
“Foreign carriers increase stake in Virgin Australia.”Published by Travel Weekly 13-12-13
Ironic, isn´t it?
16 Dec 2013
at 10:21
AMcWhirterParticipantReports in the Aussie media say that EK has ruled out investing in Qantas.
16 Dec 2013
at 11:26
canuckladParticipantQantas tried the cheap and easy option with their agreement with Emirates
It reminds me of the old Silent Night advert, unfortunately in this case,it seems as if the hippo as rolled over and crushed the duck !
Travelling to Australia is a total chore, so breaking up the journey in Singapore, Bangkok or Hong Kong is definitely on the radar.
Dubai……ehmmmm no !So they have managed to successfully alienate IMO a massive target audience…Sheer stupidity !!!
16 Dec 2013
at 11:32
WillieWelshParticipantIt will certainly be interesting to watch what happens next to the red roo. I’m sure the arrangement makes sense to people who don’t live next to hub airports to make a one stop journey to Aus rather than a two, in some cases backtracking to go to LHR on BA short haul.
QF have obviously lost market share between DXB and LHR doing this though, surely though Joyce foresaw this and factored it in to his reckoning? They must have known how many passengers they would lose to EK at DXB who were heading to places like Germany and Italy? If they didn’t, it’s time for Joyce to go.
16 Dec 2013
at 15:56 -
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